The White House said Monday that the federal budget deficit for the current fiscal year will shrink to $759 billion. That’s more than $200 billion less than the administration predicted just three months ago.
The new figures reflect additional revenues generated by the improving economy and take into account automatic, across-the-board spending cuts that the White House had hoped to avert.
The White House projected that economic growth would be slightly slower in the coming years than it forecast in April. The report said the automatic spending cuts that kicked in during March will slow down economic growth this year from the 2.6 percent increase it forecast for the fourth quarter of this year to a 2.4 percent increase.
But the White House sees a slightly rosier jobs picture. It projects that unemployment will average 7 percent next year and reach 6.8 percent in the final quarter of 2014. That’s an improvement over the 7.2 percent unemployment it forecast in April as an average for 2014.
The 2013 budget year ending Sept. 30 will be the first one of Obama’s presidency in which the deficit won’t exceed $1 trillion. Obama inherited a struggling economy and record deficits. A 2011 deficit-cutting deal with Republicans has pared deficits somewhat, as did a tax hike enacted earlier this year on upper-bracket earners.
But Obama has remained at odds with Republicans about cutting benefit programs and further tax increases. The improving deficit picture seems to have taken away some of the momentum for an additional deficit-cutting bargain, but the issue may be rejoined this fall when Obama and Congress need to enact an increase in the nation’s borrowing $16.7 trillion borrowing limit to avoid an economy-rattling default on the government’s obligations.
Last year’s deficit registered about $1.1 trillion. The White House earlier this year predicted the 2013 deficit would be $973 billion. The Congressional Budget Office has an even more optimistic $670 billion deficit projection for 2013 and it wouldn’t be unusual for CBO’s figures to turn out to be more accurate.
As a percentage of the economy, the new deficit would be half the size of what it was when Obama entered office. At the time, he vowed to cut the deficit in half by the end of his first term, a pledge that took longer to fulfill.
Although the White House predicts improvement this year, it sees somewhat higher deficits in future years than it did in April, mostly because slightly more pessimistic predictions of economic growth would produce $384 billion less in tax receipts over that period.
In the upcoming decade, the White House predicts accumulated deficits of $5.8 trillion; in April it predicted $5.3 trillion in total deficits over 2014-2023.
White House budget director Sylvia Mathews Burwell said that this year’s deficit is less than half of the record deficit posted four years ago when measured against the size of the economy. The 2013 deficit would equal 4.7 percent of gross domestic product versus the 10.1 percent of GDP in 2009.
The report reprises longstanding Obama proposals to increase taxes on upper-income earners, curb payments to Medicare providers, and close special interest tax breaks enjoyed by oil companies and other businesses. It also would impose a less generous cost-of-living adjustment for Social Security recipients, a proposal that is opposed by many Democrats. But it steers clear of controversial cuts to Medicare and the Medicaid health program for the poor and disabled, and it leaves Obama’s signature health care law untouched.
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